Key 2026 401(k) Changes to Boost Retirement Savings Amid Rising Costs
As many older Americans approach retirement concerned about health care costs and inflation, financial advisors are highlighting critical updates to 401(k) plans for 2026. These changes offer increased savings potential and include a new rule affecting higher earners' catch-up contributions.
For 2026, the employee deferral limit rises to $24,500, up from $23,500. The total contribution limit, including employer matches, increases to $72,000. Savers aged 50 and older can contribute an extra $8,000 as a catch-up (up from $7,500), while the "super catch-up" limit for ages 60-63 remains at $11,250. Individual Retirement Account (IRA) limits also rise to $7,500, with a $1,100 catch-up for those 50 and over.
Roth Catch-Up Mandate for Higher Earners Takes Effect
A significant new rule from the Secure 2.0 Act takes effect in 2026: employees aged 50+ who earned more than $150,000 from the same employer in the prior year (2025) must make their catch-up contributions on a Roth (after-tax) basis. This mandate aims to generate future tax revenue for the government, as Roth withdrawals are tax-free. Exceptions apply for those who started a new job on January 1, 2026, or who exceeded the income threshold across multiple employers.
Financial experts emphasize that higher limits only benefit savers who actively increase their contributions. Vanguard's 2025 report found that while 45% of participants raised their deferrals in 2024, only 14% maxed out their plans. The average combined savings rate was 12%. With over a third of U.S. adults delaying retirement due to insufficient savings, advisors urge clients to review and adjust their 401(k) contributions early in the year to take full advantage of the new limits and optimize their retirement strategy.
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